Global sourcing has become such an important part of the supply chain that sometimes it can be hard to remember when it wasn’t such an integral part of how businesses operate. But when did this phenomenon begin? How big is it now? And what does it mean for our global economy? To learn more about the current and future state of global sourcing, check out this article on 6 ways global sourcing affects supply chains in today’s global economy.
1) Introduction
While it’s not a new phenomenon, supply chain experts have been noting a rise in global sourcing for several years now. But what is global sourcing? Put simply, it’s when companies begin to work with business partners from other countries in order to reduce costs and increase efficiency. To learn more about how global sourcing is changing supply chains around the world, check out our latest infographic.
2) China Takes Over
The past decade has seen an exponential growth in global sourcing, which refers to businesses buying goods and services from overseas suppliers. While there are plenty of reasons why companies outsource, one reason that stands out is cost: Global sourcing allows businesses to get their products or services at a lower price than they could get them for domestically. Because of rapid economic growth in China and India, companies often rely on imports from these regions with the help of china sourcing company to get their supplies.
3) Industrial Espionage
A lot of products we buy in America come from places like China and Bangladesh. A lot of us probably don’t know where things like our clothes and electronics are coming from, which means we don’t really know how they were made. And while most people probably don’t care that much about whether their yoga pants were manufactured in a way that respects human rights or that their iPhone was built by underpaid workers who received no safety training—there are some good reasons for caring. Despite what you might think, country-of-origin labeling (COOL) is one of them. Every product sold in America has to have information about its origin—whether it’s made here or not.
4) Regulatory Requirements
Rising labor and operating costs in China and other major manufacturing hubs have forced many companies to consider relocating their manufacturing operations to other countries. And while some corporations prefer to move their facilities closer to home, others want to tap into lower-cost emerging markets such as India and Vietnam. These up-and-coming locations offer not only cheap labor but also strategic business advantages. For example, moving operations closer to your target market gives you faster access to new trends; using local vendors helps you establish strong ties with foreign partners, and locating operations near your customers ensures that your products will get delivered quickly.
5) Country-of-Origin Labeling (COOL)
Country-of-origin labeling, or COOL, is a law that requires food products to display labels with information about where each ingredient comes from. The US Department of Agriculture first passed COOL laws in 2002 after Congress passed them under President Clinton. However, numerous groups have fought against it since then—not just because they claim it adds to production costs, but also because it makes products less desirable for customers who may want products made outside of their own country. If you are considering global sourcing as part of your supply chain management strategy, keep an eye on government policy concerning country-of-origin labeling. This is something you will need to take into account if you are thinking about doing business internationally.
6) Shift in Consumer Awareness
The Internet is taking over our lives, and it’s also influencing how we shop. E-commerce purchases are up to seven times more likely to be influenced by online opinions than in-store experiences (that means when you buy something online, there’s a 70% chance it was because of an online review). Online reviews are reshaping supply chains in both subtle and significant ways. One example is in e-commerce clothing sales; these purchases make up 75% of all clothing sales, but only 10% of brick-and-mortar retail revenues. As consumers trust their peers more than brands or stores, global sourcing companies and supply chains will continue to shift towards social media influence.
